Ashish Kacholia's portfolio high ROE & high ROCE multibagger chemicals stock; Board likely to raise funds via private placement, preferential issue or QIP

The stock gave multibagger returns of 300 per cent in 3 years, 820 per cent returns in 5 years and a whopping 7,250 per cent in a decade. 

Fineotex Chemical Ltd (FCL) inform you that the meeting of the Board of Directors of the company will be held on Saturday, June 01, 2024, inter alia to consider the following:

1. Proposal for raising funds by way of the issue of one or more instruments comprising of equity shares, convertible securities of any other description or warrants or debt securities, through private placement/preferential issue/qualified institutions placement (QIP) or such other methods or combinations thereof as may be decided by the Board and to approve ancillary actions for the above-mentioned fundraising, subject to such Statutory/Regulatory approvals as may be necessary, wherever required; and

2. Conducting extra-ordinary general meeting/postal ballot, to seek approval of shareholders inter-alia in respect of the aforesaid proposal, if the same is approved by the Board.

On Monday, shares of Fineotex Chemical Ltd (FCL) plunged 2.84 per cent to Rs 367.25 per share with an intraday high of Rs 378 and an intraday low of Rs 366.40 from its previous closing of Rs 378. The stock is down by 20 per cent from its 52-week high of Rs 458 per share and gained 38 per cent from its 52-week low of Rs 265.95 per share.

Furthermore, the company is into expansion and growth and is currently in advanced discussions to acquire a specialty chemicals manufacturer. This potential acquisition aligns perfectly with Fineotex's existing business, as the target company's products and customers. Negotiations and due diligence are ongoing, reflecting Fineotex's commitment to internal growth and strategic acquisitions that create value for stakeholders. It's important to note that the finalisation of the acquisition depends on completing due diligence and other relevant factors.

India's chemicals industry ranks 6th in production and 14th in exports. It is the backbone of numerous sectors like agrochemicals, pharmaceuticals, textiles, paper, paints, and soaps, with a current valuation of USD 220 billion. Projecting a growth of approximately 9 per cent per annum during 2020-25, the industry is expected to reach USD 300 billion by FY25 and a staggering USD 1 trillion by FY40.

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Fineotex Chemical Ltd, founded in 1979, is a leading manufacturer of specialty chemicals for various industries. Their core business is textile chemicals, with a focus on research and development through their subsidiary Biotex Malaysia. They also offer cleaning and hygiene products like sanitisers and detergents. Fineotex boasts over 470 product categories, including chemicals for every stage of textile production, oil and water-based drilling fluids, and home care disinfectants. With a presence in over 70 countries and a network of over 100 dealers, they serve major clients like Nahar Group and Raymond in the textile industry.

An ace investor, Ashish Kacholia has 31,35,568 shares or 2.83 per cent stake in the company. This company's stock price is valued in line with its industry peers based on its price-to-earnings ratio, while also demonstrating strong profitability with a return on equity of 29 per cent and a return on capital employed of 36 per cent.

The company did well last year (FY23), making Rs 517 crore in sales, a profit from operations of Rs 119.90 crore and a net profit of Rs 89.55 crore. Looking at the most recent quarters (Q1FY24, Q2FY24, Q3FY24), their sales total Rs 415.95 crore, operating profit is Rs 122.48 crore and net profit is Rs 90.55 crore. This means to hit their yearly numbers (FY24) from last year, they only need Rs 101.05 crore more in sales in the last quarter (Q4FY24). The good news is their operating profit is already Rs 2.58 crore higher than this point last year and their net profit is Rs 1 crore higher. Overall, the company has been doing well with sales of over Rs 100 crore each quarter for the last 2 years, operating profits consistently in the double digits, and net profits also in the double digits.

This company is financially strong with a market cap exceeding Rs 4,000 crore and minimal debt. Furthermore, it has shown impressive profit growth averaging 31.1 per cent annually over the past five years. It has improved its working capital efficiency by reducing debtor days from 107 days to 71.6 days and lowering working capital requirements from 115 days to 76.1 days. The stock gave multibagger returns of 300 per cent in 3 years, 820 per cent returns in 5 years and a whopping 7,250 per cent in a decade. 

Disclaimer: The article is for informational purposes only and not investment advice